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Federal Ethics for the Tax Professional: Circular 230 and IRC §6694. 2013 Edition The JW Group, LLC P.O. Box 507 Aptos, CA 95001-0507 (831) 435-3271 www.thejwtaxgroup.com. Federal Regulation of Tax Preparers - Overview.

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federal ethics for the tax professional circular 230 and irc 6694

Federal Ethics for the Tax Professional: Circular 230 and IRC §6694

2013 Edition

The JW Group, LLC

P.O. Box 507

Aptos, CA 95001-0507

(831) 435-3271

www.thejwtaxgroup.com

federal regulation of tax preparers overview
Federal Regulation of Tax Preparers - Overview
  • Title 31 Code of Federal Regulations, Subtitle A, Part 10 – also known as Circular 230 – provides Federal regulations governing the practice before the Department of Treasury / Internal Revenue Service.
  • The statutory authority for these regulations is 31 U.S.C. §330.
general scope of circular 230
General Scope of Circular 230
  • Pursuant to §10.0 of Circular 230, attorneys, certified public accountants, enrolled agents, enrolled retirement plan agents and registered tax return preparers are subject to the regulations set forth in Circular 230.
  • In addition to those tax professionals listed above, other persons representing taxpayers before the Internal Revenue Service are also regulated by Circular 230 under certain circumstances.
office of professional responsibility opr
Office of Professional Responsibility (OPR)
  • Under §10.1 of Circular 230 the Office of Professional Responsibility (OPR) is the primary section of the Internal Revenue Service that has the power to administer and enforce the regulations set forth in Circular 230.
  • The OPR has the power to discipline tax practitioners for violations of the rules contained in Circular 230.
what is considered practicing before the irs
What is Considered “Practicing” Before the IRS?
  • §10.2(4) of Circular 230 states that practice before the Internal Revenue Service (IRS) comprehends all matters connected with a presentation to the IRS relating to a taxpayer’s rights, privileges, or liabilities under laws or regulations administered by the Internal Revenue Service.
  • Such presentations include, but are not limited to: preparing documents; filing documents; corresponding and communicating with the IRS; rendering written advice with respect to any entity, transaction, plan or arrangement, or other plan or arrangement having a potential for tax avoidance or evasion; and representing a client at conferences, hearings, and meetings.
who may practice before the irs
Who May Practice Before the IRS
  • Per §10.3 of Circular 230, Attorneys, Certified Public Accounts, Enrolled Agents and Enrolled Actuaries in good standing may practice before the IRS.
  • Practice as a registered tax return preparer is generally limited to preparing and signing tax returns and claims for refund, and other documents for submission to the IRS.
  • A registered tax return preparer may represent taxpayers before the IRS during an examination only if the registered tax return preparer signed the tax return or claim for refund for the taxable year or period under examination.
review question no 1
Review Question No.1

Q1: The regulations found in Circular 230 can be found in:

  • §162 of the Internal Revenue Code
  • Title 31 Code of Federal Regulations, Subtitle A, Part 10

C) IRS Publication 225

D) IRS Publication 334

Your Answer Here: ________

[Turn to the next slide only after you have answered this review question]

answer to review question no 1
Answer to Review Question No.1
  • The correct answer is B
  • Answer A is incorrect because this code section deals with the deductibility of trade or business expenses.
  • Answer C is incorrect because this publication is the Federal tax law guide for farmers.
  • Answer D is incorrect because this publication is the Federal tax law guide for small businesses.
review question no 2
Review Question No. 2

Q2: Which of the following is false regarding the Office of Professional Responsibility (OPR)?

  • It is part of the Internal Revenue Service
  • The OPR has the power to administer and enforce the regulations contained in Circular 230

C) The OPR has the power to discipline tax practitioners for Circular 230 violations

D) None of these statements are false

Your Answer Here: ________

[Turn to the next slide only after you have answered this review question]

answer to review question no 2
Answer to Review Question No. 2
  • The correct answer is D
  • Answer A is incorrect because the OPR is a division within the Internal Revenue Service
  • Answer B is incorrect because the OPR is specifically empowered to administer and enforce the Regulations contained in Circular 230 per §10.1(a).
  • Answer C is incorrect because part of the OPR’s power to administer and enforce Circular 230 on tax practitioners includes the power of discipline.
qualifying continuing education for registered tax return preparers
Qualifying Continuing Education for Registered Tax Return Preparers
  • Per §10.6 of Circular 230, registered tax return preparers must complete a minimum of 15 hours of qualifying continuing education credit per year.
  • The 15 hours must include (at a minimum):
  • A) Two hours of ethics or professional conduct
  • B) Three hours of Federal tax law updates, and
  • C) 10 hours of Federal tax law topics.
qualifying continuing education for registered tax return preparers continued
Qualifying Continuing Education for Registered Tax Return Preparers (Continued)
  • Per §10.6(j) of Circular 230, compliance with the continuing education requirements for a registered tax return preparers is determined by the IRS.
  • The IRS will provide notice to any registered tax return preparer who fails to meet the continuing education requirements for eligibility of renewal.
  • The notice will state the basis for the determination of noncompliance and will provide the individual an opportunity to furnish the requested information in writing relating to the completion of all required continuing education hours for the registration year.
review question no 3
Review Question No. 3

Q3: Which of the following of the following is false regarding qualifying continuing education courses for registered tax return preparers?

  • At least two hours of ethics or professional conduct are required each year.
  • At least three hours of Federal tax law updates are required each year.
  • At least six hours of Federal tax topics are required each year.

D) A minimum of 15 hours of qualifying continuing education is required annually

Your Answer Here: ________

[Turn to the next slide only after you have answered this review question]

answer to review question no 3
Answer to Review Question No. 3
  • The correct answer is C

All of the answers except for Answer C are part of the new Federal continuing education requirements for registered tax return preparers starting in 2012.

Answer C is incorrect because a minimum of 10 hours of Federal law topics are required every year for registered tax return preparers starting in 2012.

duties and restrictions relating to practice before the irs
Duties and Restrictions Relating to Practice Before the IRS
  • Circular 230 contains a number of rights and responsibilities on tax practitioners that practice before the IRS.
  • Per §10.20 of Circular 230, a practitioner must, upon a proper and lawful request by a duly authorized officer or employee of the Internal Revenue Service, promptly submit records or information in any matter before the Internal Revenue Service unless the practitioner believes in good faith and on reasonable grounds that the records or information are privileged.
duties and restrictions relating to practice before the irs continued
Duties and Restrictions Relating to Practice Before the IRS (continued)
  • Where the requested records or information are not in the possession of, or subject to the control of, the practitioner or the practitioner’s client, the practitioner must promptly notify the requesting Internal Revenue Service officer or employee and the practitioner must provide any information that the practitioner has regarding the identity of any person who the practitioner believes may have possession or control of the requested records or information.
duties and restrictions relating to practice before the irs continued1
Duties and Restrictions Relating to Practice Before the IRS (continued)
  • The practitioner must make reasonable inquiry of his or her client regarding the identity of any person who may have possession or control of the requested records or information, but the practitioner is not required to make inquiry of any other person or independently verify any information provided by the practitioner’s client regarding the identity of such persons.
knowledge of client s omission
Knowledge of Client’s Omission
  • §10.21 of Circular 230 states that a practitioner who, having been retained by a client with respect to a matter administered by the Internal Revenue Service, knows that the client has not complied with the revenue laws of the United States or has made an error in or omission from any return, document, affidavit, or other paper which the client submitted or executed under the revenue laws of the United States, must advise the client promptly of the fact of such noncompliance, error, or omission.
knowledge of client s omission cont
Knowledge of Client’s Omission (Cont.)
  • The practitioner must advise the client of the consequences as provided under the Code and regulations of such noncompliance, error, or omission.
reliance on other professionals diligence as to accuracy
Reliance on Other Professionals – Diligence as to Accuracy
  • With some exceptions, a practitioner will be presumed to have exercised due diligence for purposes of this section if the practitioner relies on the work product of another person and the practitioner used reasonable care in engaging, supervising, training, and evaluating the person, taking proper account of the nature of the relationship between the practitioner and the person.
prompt disposition of pending matters before the irs
Prompt Disposition of Pending Matters Before the IRS
  • A practitioner may not unreasonably delay the prompt disposition of any matter before the Internal Revenue Service.
review question no 4
Review Question No. 4
  • Which of the following tax practitioners would be in violation of the Circular 230 regulations?
  • Bill Bridge, an Enrolled Agent, who did not properly submit information that was properly and lawfully requested by an IRS employee and Bill did not believe in good faith that the information was privileged.
  • Susan Stone, a Certified Public Accountant, who intentionally and unreasonably delayed responding to a lawful and proper request from the IRS for the tax return workpapers of a client because the CPA knew the IRS agent making the request would be retiring in a few weeks and the practitioner and client preferred to work with another IRS agent.
  • Ray Shines, a registered tax return preparer, after filing his client’s 2012 tax returns, discovered that $15,000 in taxable income was unreported on the tax return. After becoming aware of this omission, Ray did not mention anything to the client regarding this unreported income.
  • All of the above practitioners would be in violation of the Circular 230 regulations.
  • None of the above practitioners would be in violation of the Circular 230 regulations.

Your Answer Here: ________

[Turn to the next slide only after you have answered this review question]

answer to review question no 4
Answer to Review Question No. 4
  • The correct answer is D.
  • Bill Bridge violated the regulation that required practitioners to promptly submit records or information to the IRS if the request is legal and proper and the practitioner does not believe in good faith, on reasonable grounds, that the records or information is privileged.
  • Susan Stone violated the regulation that prohibits practitioners from unreasonably delaying the prompt disposition of any matter before the IRS.
  • Ray Shines violated the regulation that requires practitioners to promptly advise their clients of the fact that an omission has occurred as well as the consequences resulting from the omission.
tax practitioner fees in general
Tax Practitioner Fees – In General
  • §10.27 of Circular 230 covers the area of fees charges by a tax practitioner to the client.
  • A practitioner may not charge an unconscionable fee in connection with any matter before the Internal Revenue Service.
practitioner fees contingent fees
Practitioner Fees: Contingent Fees
  • The default rule under Circular 230 is that a tax practitioner may not charge a contingent fee for services rendered in connection with any matter before the Internal Revenue Service.
  • A contingent fee is defined, under Circular 230, as follows:

Any fee that is based, in whole or in part, on whether or not a position taken on a tax return or other filing avoids challenge by the Internal Revenue Service or is sustained either by the Internal Revenue Service or in litigation.

practitioner fees contingent fees cont
Practitioner Fees: Contingent Fees (Cont.)
  • In addition, a contingent fee includes a fee that is based on a percentage of the refund reported on a return, that is based on a percentage of the taxes saved, or that otherwise depends on the specific result attained.
  • A contingent fee also includes any fee arrangement in which the practitioner will reimburse the client for all or a portion of the client’s fee in the event that a position taken on a tax return or other filing is challenged by the Internal Revenue Service or is not sustained, whether pursuant to an indemnity agreement, a guarantee, rescission rights, or any other arrangement with a similar effect.
contingent fees cont
Contingent Fees (Cont.)
  • However, a practitioner may charge a contingent fee for services rendered in the following three circumstances:
  • 1) The Service’s examination of, or challenge to an original tax return or an amended return or claim for refund or credit where the amended return or claim for refund or credit was filed within 120 days of the taxpayer receiving a written notice of the examination of, or a written challenge to the original tax return.
  • 2) A claim for credit or refund filed solely in connection with the determination of statutory interest or penalties assessed by the Internal Revenue Service, or
  • 3) Services rendered in connection with any judicial proceeding arising under the Internal Revenue Code.
the client s records
The Client’s Records
  • In general, a practitioner must, at the request of a client, promptly return any and all records of the client that are necessary for the client to comply with his or her Federal tax obligations.
  • The practitioner has the option to retain copies of the records returned to a client.
  • The existence of a dispute over fees generally does not relieve the practitioner of his or her responsibility to return the records to the client.
the client s records cont
The Client’s Records (Cont.)
  • Nevertheless, if applicable state law allows or permits the retention of a client’s records by a practitioner in the case of a dispute over fees for services rendered, the practitioner need only return those records that must be attached to the taxpayer’s return.
  • The practitioner, however, in such an event as detailed above must provide the client with reasonable access to review and copy any additional records of the client retained by the practitioner under state law that are necessary for the client to comply with his or her Federal tax obligations.
the client s records cont1
The Client’s Records (Cont.)
  • Note that the “records of the client” include all documents or written or electronic materials provided to the practitioner, or obtained by the practitioner in the course of the practitioner’s representation of the client, that preexisted the retention of the practitioner by the client.
  • It also includes materials that were prepared by the client or a third party (not including an employee or agent of the practitioner) at any time and provided to the practitioner with respect to the subject matter of the representation.
the client s records cont2
The Client’s Records (Cont.)
  • It also includes any return, claim for refund, schedule, affidavit, appraisal or any other document prepared by the practitioner, or his or her employee or agent, that was presented to the client with respect to a prior representation if such document is necessary for the taxpayer to comply with his or her current Federal tax obligations.
  • However, records of the client does not include any return, claim for refund, schedule, affidavit, appraisal or any other document prepared by the practitioner or the practitioner’s firm, employees or agents if the practitioner is withholding such document pending the client’s performance of its contractual obligation to pay fees with respect to such document.
conflicts of interests
Conflicts of Interests
  • The default rule is that a practitioner shall not represent a client before the Internal Revenue Service if the representation involves a conflict of interest.
conflicts of interests cont
Conflicts of Interests (Cont.)

A conflict of interest exists if:

(1) The representation of one client will be directly adverse to another client; or

(2) There is a significant risk that the representation of one or more clients will be materially limited by the practitioner’s responsibilities to another client, a former client or a third person, or by a personal interest of the practitioner.

conflicts of interests cont1
Conflicts of Interests (Cont.)
  • However, even if there is a conflict of interest, a tax practitioner may nevertheless represent a client if:
  • (1) The practitioner reasonably believes that the practitioner will be able to provide competent and diligent representation to each affected client;
  • (2) The representation is not prohibited by law; and
  • (3) Each affected client waives the conflict of interest and gives informed consent, confirmed in writing by each affected client, at the time the existence of the conflict of interest is known by the practitioner.
conflicts of interests cont2
Conflicts of Interests (Cont.)
  • The confirmations from the clients may be made within a reasonable period of time after the informed consent, but in no event later than 30 days.
conflicts of interests cont3
Conflicts of Interests (Cont.)
  • Copies of the written consents must be retained by the practitioner for at least 36 months from the date of the conclusion of the representation of the affected clients.
  • Furthermore, the written consents must be provided to any officer or employee of the Internal Revenue Service on request.
review question no 5
Review Question No. 5
  • Which of the following fees are allowed to be charged to a client by a tax practitioner?
  • 30% of the amount of the refund amount to file a client’s original 1040.
  • 50% of the amount of the refund amount to file a client’s original 1040 – if the 1040 is not audited.
  • 25% of the refund claim prepared by the tax practitioner within 120 days of the client receiving a written notice of the examination of the originally filed 1040.
  • All of the above.
  • None of the above.

Your Answer Here: ________

[Turn to the next slide only after you have answered this review question]

answer to review question no 5
Answer to Review Question No. 5
  • The correct answer is C.

A is incorrect because this is a contingent fee as it is based on the percentage of the refund reported on a return and contingent fees are not allowed for originally filed tax returns.

B is incorrect because this is also an originally filed return and the fee is contingent on both the amount of the refund and if the original return is not picked for examination by the IRS.

C is correct because while it is a contingent fee, contingent fees are permitted for refund claims made within 120 days of the client receiving a written notice of the examination of the originally filed return.

review question no 6
Review Question No. 6
  • Which of the following is permitted:
  • A tax practitioner refuses to return the current tax year’s W-2’s of the client until the client pays $1,000 of unpaid tax return preparation fees from the prior year.
  • A tax practitioner who refuses to provide tax return workpapers that the practitioner prepared during the preparing of the client’s 2012 tax returns until the unpaid tax return fees for the 2011 tax year have been paid.
  • Both A and B.
  • Neither A or B.

Your Answer Here: ________

[Turn to the next slide only after you have answered this review question]

answer to review question no 6
Answer to Review Question No.6
  • The correct answer is B.

A is incorrect because a tax practitioner must, at the request of a client, promptly return any and all records of the client that are necessary for the client to comply with his or her Federal tax obligations. A W-2 is necessary to file one’s Federal income tax returns.

B is correct because workpapers prepared by the practitioner are not considered records of the client that must be returned to the client upon request of the client.

advertising in general
Advertising – In General
  • A practitioner may not, with respect to any Internal Revenue Service matter, in any way use or participate in the use of any form of public communication or private solicitation containing a false, fraudulent, or coercive statement or claim; or a misleading or deceptive statement or claim.
advertising of practitioner s fees
Advertising of Practitioner’s Fees
  • A practitioner may publish the availability of a written schedule of fees and disseminate the fee information for the following:
  • (1) Fixed fees for specific routine services.
  • (2) Hourly rates.
  • (3) Range of fees for particular services.
  • (4) The fee charged for an initial consultation.
advertising of fees cont
Advertising of Fees (Cont.)
  • Any statement of fee information concerning matters in which costs may be incurred must include a statement disclosing whether clients will be responsible for such costs.
advertising of fees cont1
Advertising of Fees (Cont.)
  • A practitioner may not charge more than the rates published for at least 30 calendar days after the last date on which the schedule of fees was published.
negotiation of taxpayer checks
Negotiation of Taxpayer Checks
  • A practitioner who prepares tax returns may not endorse or otherwise negotiate any check issued to a client by the government in respect of a Federal tax liability.
review question no 7
Review Question No. 7
  • Which of the following statements is false regarding conflicts of interest:
  • A practitioner is never allowed – under any circumstances - to represent a client before the IRS if a conflict of interest is involved.
  • A conflict of interest exists if the representation of one client will be directly adverse to another client.
  • Both A and B are false.
  • Neither A or B are false.

Your Answer Here: ________

[Turn to the next slide only after you have answered this review question]

answer to review question no 7
Answer to Review Question No. 7
  • The correct answer is A.
  • A is false because while generally a tax practitioner may not represent a client if it involves a conflict of interest, nevertheless such representation is permitted so long as the conflicting clients submits written waivers (with specific requirements) to the practitioner.
  • B is not false because this is one of the regulations’ definitions of a conflict of interest.
review question no 8
Review Question No.8
  • Which of the following advertisements are permitted:
  • Helen Sues, CPA, advertises in the local newspaper that she charges $100 per hour for tax planning services.
  • Nori Aki, registered tax return preparer, posts on her website that she charges $100 to prepare a Federal 1040-EZ.
  • Both A and B
  • Neither A or B

Your Answer Here: ________

[Turn to the next slide only after you have answered this review question]

answer to review question no 8
Answer to Review Question No. 8
  • The correct answer is B

The ads listed under both answers A and B are allowed as a practitioner may publish the availability of a written schedule fees and disseminate the fee information for, among other items, fixed fees for specific routine services as well as for hourly rates.

review question no 9
Review Question No. 9
  • True or False:

A practitioner who prepares tax returns is allowed to endorse a Federal income tax return refund check issued to a client?

Your Answer Here: ________

[Turn to the next slide only after you have answered this review question]

answer to review question no 9
Answer to Review Question No. 9
  • False
  • A practitioner who prepares tax returns may not endorse or otherwise negotiate any check issued to a client by the government in respect of a Federal tax liability.
best practices
Best Practices
  • Tax advisors should provide clients with the highest quality representation concerning Federal tax issues by adhering to best practices in providing advice and in preparing or assisting in the preparation of a submission to the Internal Revenue Service.
best practices cont
Best Practices (Cont.)

Best practices include (but are not limited to):

1) Communicating clearly with the client regarding the terms of the engagement.

- For example, the advisor should determine the client’s expected purpose for and use of the advice and should have a clear understanding with the client regarding the form and scope of the advice or assistance to be rendered;

best practices cont1
Best Practices (Cont.)
  • 2) Establishing the facts, determining which facts are relevant, evaluating the reasonableness of any assumptions or representations, relating the applicable law (including potentially applicable judicial doctrines) to the relevant facts, and arriving at a conclusion supported by the law and the facts;
best practices cont2
Best Practices (Cont.)
  • 3) Advising the client regarding the utilization of the conclusions reached, including, for example, whether a taxpayer may avoid accuracy-related penalties under the Internal Revenue Code if a taxpayer acts in reliance on the advice; and
  • 4) Acting fairly and with integrity in practice before the Internal Revenue Service.
tax return standards preparer penalties for unreasonable positions irc 6694
Tax Return Standards – Preparer Penalties for Unreasonable Positions – IRC §6694
  • In general, if a tax return preparer—
  • (A) prepares any return or claim of refund with respect to which any part of an understatement of liability is due to an “unreasonable position” and
  • (B) knew (or reasonably should have known) of the position,
  • Then such tax return preparer shall pay a penalty with respect to each such return or claim in an amount equal to the greater of $1,000 or 50 percent of the income derived (or to be derived) by the tax return preparer with respect to the return or claim.
tax return standards preparer penalties for unreasonable positions irc 6694 cont
Tax Return Standards – Preparer Penalties for Unreasonable Positions – IRC §6694 (Cont.)
  • Generally a position is “unreasonable” unless there is or was substantial authority for the position.
  • However, if the position is disclosed to the IRS, then it will not be considered unreasonable if there is a reasonable basis for the position.
  • Note that if the position is with respect to a tax shelter or a reportable transaction, the position is unreasonable unless it is reasonable to believe that the position would more likely than not be sustained on its merits.

Reasonable cause exception.

The unreasonable position penalty shall be imposed if it is shown that there is reasonable cause for the understatement and the tax return preparer acted in good faith.

tax return standards preparer penalties for unreasonable positions irc 6694 cont1
Tax Return Standards – Preparer Penalties for Unreasonable Positions – IRC §6694 (Cont.)

Understatement due to Willful or Reckless Conduct

  • In general, any tax return preparer who prepares any return or claim for refund with respect to which any part of an understatement of liability is due to willful or reckless conduct described shall pay a penalty with respect to each such return or claim in an amount equal to the greater of—
  • (A) $5,000, or
  • (B) 50 percent of the income derived (or to be derived) by the tax return preparer with respect to the return or claim.
tax return standards preparer penalties for unreasonable positions irc 6694 cont2
Tax Return Standards – Preparer Penalties for Unreasonable Positions – IRC §6694 (Cont.)

Willful or Reckless Conduct – Defined

Willful or reckless conduct is conduct by the tax return preparer which is—

  • (A) a willful attempt in any manner to understate the liability for tax on the return or claim, or
  • (B) a reckless or intentional disregard of rules or regulations.
relying on information furnished by clients
Relying on Information Furnished by Clients
  • A practitioner advising a client to take a position on a tax return, document, affidavit or other paper submitted to the Internal Revenue Service, or preparing or signing a tax return as a preparer, generally may rely in good faith without verification upon information furnished by the client.
  • The practitioner may not, however, ignore the implications of information furnished to, or actually known by, the practitioner, and must make reasonable inquiries if the information as furnished appears to be incorrect, inconsistent with an important fact or another factual assumption, or incomplete.
penalties for violations of the regulations under circular 230
Penalties for Violations of the Regulations under Circular 230
  • The Secretary of the Treasury, or delegate, after notice and an opportunity for a proceeding, may censure, suspend, or disbarany practitioner from practice before the Internal Revenue Service if the practitioner is shown to:
  • Be incompetent or disreputable (within the meaning of §10.51 of Circular 230 – see pages 47-62 for some of the examples listed by the IRS);
  • Fail to comply with any regulation listed in §10.52 of Circular 230; or
  • With intent to defraud, willfully and knowingly misleads or threatens a client or prospective client.
penalties for violations of the regulations under circular 230 cont
Penalties for Violations of the Regulations under Circular 230 (Cont.)
  • In addition to being censured, suspended, or disbarred a practitioner may also be subject to monetary penalties.
  • The amount of the monetary penalty shall not exceed the gross income derived (or to be derived) from the conduct giving rise to the penalty.
incompetence and disreputable conduct
Incompetence and Disreputable Conduct
  • Incompetence and disreputable conduct for which a practitioner may be sanctioned includes, but is not limited to:
  • (1) Conviction of any criminal offense under the Federal tax laws.
  • (2) Conviction of any criminal offense involving dishonesty or breach of trust.
  • (3) Conviction of any felony under Federal or State law for which the conduct involved renders the practitioner unfit to practice before the Internal Revenue Service.
incompetence and disreputable conduct cont
Incompetence and Disreputable Conduct (Cont.)
  • (4) Giving false or misleading information, or participating in any way in the giving of false or misleading information to the Department of the Treasury or any officer or employee thereof, or to any tribunal authorized to pass upon Federal tax matters, in connection with any matter pending or likely to be pending before them, knowing the information to be false or misleading.
  • [Facts or other matters contained in testimony, Federal tax returns, financial statements, applications for enrollment, affidavits, declarations, and any other document or statement, written or oral, are included in the term “information.”]
incompetence and disreputable conduct cont1
Incompetence and Disreputable Conduct (Cont.)
  • (5) Solicitation of employment as prohibited under §10.30 of Circular 230, the use of false or misleading representations with intent to deceive a client or prospective client in order to procure employment, or intimating that the practitioner is able improperly to obtain special consideration or action from the Internal Revenue Service or any officer or employee thereof.
incompetence and disreputable conduct cont2
Incompetence and Disreputable Conduct (Cont.)
  • (6) Willfully failing to make a Federal tax return in violation of the Federal tax laws, or willfully evading, attempting to evade, or participating in any way in evading or attempting to evade any assessment or payment of any Federal tax.
incompetence and disreputable conduct cont3
Incompetence and Disreputable Conduct (Cont.)
  • (7) Willfully assisting, counseling, encouraging a client or prospective client in violating, or suggesting to a client or prospective client to violate, any Federal tax law, or knowingly counseling or suggesting to a client or prospective client an illegal plan to evade Federal taxes or payment thereof.
incompetence and disreputable conduct cont4
Incompetence and Disreputable Conduct (Cont.)
  • (8) Misappropriation of, or failure properly or promptly to remit, funds received from a client for the purpose of payment of taxes or other obligations due the United States.
  • (9) Directly or indirectly attempting to influence, or offering or agreeing to attempt to influence, the official action of any officer or employee of the Internal Revenue Service by the use of threats, false accusations, duress or coercion, by the offer of any special inducement or promise of an advantage or by the bestowing of any gift, favor or thing of value.
incompetence and disreputable conduct cont5
Incompetence and Disreputable Conduct (Cont.)
  • (10) Disbarment or suspension from practice as an attorney, certified public accountant, public accountant, or actuary by any duly constituted authority of any State, territory, or possession of the United States, including a Commonwealth, or the District of Columbia, any Federal court of record or any Federal agency, body or board.
incompetence and disreputable conduct cont6
Incompetence and Disreputable Conduct (Cont.)
  • (11) Knowingly aiding and abetting another person to practice before the Internal Revenue Service during a period of suspension, disbarment or ineligibility of such other person.
incompetence and disreputable conduct cont7
Incompetence and Disreputable Conduct (Cont.)
  • (12) Contemptuous conduct in connection with practice before the Internal Revenue Service, including the use of abusive language, making false accusations or statements, knowing them to be false, or circulating or publishing malicious or libelous matter.
incompetence and disreputable conduct cont8
Incompetence and Disreputable Conduct (Cont.)
  • (13) Giving a false opinion, knowingly, recklessly, or through gross incompetence, including an opinion which is intentionally or recklessly misleading, or engaging in a pattern of providing incompetent opinions on questions arising under the Federal tax laws.
  • False opinions include those which reflect or result from a knowing misstatement of fact or law, from an assertion of a position known to be unwarranted under existing law, from counseling or assisting in conduct known to be illegal or fraudulent, from concealing matters required by law to be revealed, or from consciously disregarding information indicating that material facts expressed in the opinion or offering material are false or misleading.
incompetence and disreputable conduct cont9
Incompetence and Disreputable Conduct (Cont.)
  • Reckless conduct is a highly unreasonable omission or misrepresentation involving an extreme departure from the standards of ordinary care that a practitioner should observe under the circumstances. A pattern of conduct is a factor that will be taken into account in determining whether a practitioner acted knowingly, recklessly, or through gross incompetence.
  • Gross incompetence includes conduct that reflects gross indifference, preparation which is grossly inadequate under the circumstances, and a consistent failure to perform obligations to the client.
incompetence and disreputable conduct cont10
Incompetence and Disreputable Conduct (Cont.)
  • (14) Willfully failing to sign a tax return prepared by the practitioner when the practitioner’s signature is required by Federal tax laws unless the failure is due to reasonable cause and not due to willful neglect.
incompetence and disreputable conduct cont11
Incompetence and Disreputable Conduct (Cont.)
  • (15) Willfully disclosing or otherwise using a tax return or tax return information in a manner not authorized by the Internal Revenue Code, contrary to the order of a court of competent jurisdiction, or contrary to the order of an administrative law judge in a proceeding concerning practice before the IRS.
incompetence and disreputable conduct cont12
Incompetence and Disreputable Conduct (Cont.)
  • (16) Willfully failing to file on magnetic or other electronic media a tax return prepared by the practitioner when the practitioner is required to do so by the Federal tax laws unless the failure is due to reasonable cause and not due to willful neglect.
incompetence and disreputable conduct cont13
Incompetence and Disreputable Conduct (Cont.)
  • (17) Willfully preparing all or substantially all of, or signing, a tax return or claim for refund when the practitioner does not possess a current or otherwise valid preparer tax identification number or other prescribed identifying number.
incompetence and disreputable conduct cont14
Incompetence and Disreputable Conduct (Cont.)
  • (18) Willfully representing a taxpayer before an officer or employee of the Internal Revenue Service unless the practitioner is authorized to do so pursuant to this part.
penalties for violations of the regulations under circular 2301
Penalties for Violations of the Regulations under Circular 230
  • Any monetary penalty imposed on a practitioner may be in addition to or in lieu of any suspension, disbarment or censure and may be in addition to a penalty imposed on an employer, firm or other entity.
review question no 10
Review Question No.10
  • What are some of the possible sanctions may a tax practitioner face for threatening a client or prospective client
  • Censure
  • Suspension
  • Disbarment

D) All of the above

Your Answer Here: ________

[Turn to the next slide only after you have answered this review question]

answer to review question no 10
Answer to Review Question No.10
  • The correct answer is D.

The Secretary of the Treasury, or delegate, after notice and an opportunity for a proceeding, may censure, suspend, or disbar any practitioner from practice before the Internal Revenue Service if the practitioner is shown to have threatened a client or prospective client.

references
References
  • Link to Circular 230 (Revised August, 2011): http://www.irs.gov/pub/irs-pdf/pcir230.pdf
  • IRC §6694 – See attached .pdf document